According to US Treasury Secretary Scott Bessent, the Strait of Hormuz could become irrelevant within two years as Persian Gulf oil producers actively build alternative bypass routes. While the crucial waterway remains open, a shadow oil transit network moves more than 4 million barrels per day from the United Arab Emirates, Iraq, Kuwait, and Qatar, bypassing traditional choke points despite ongoing Middle East conflicts.
The Rise of the Shadow Tanker Network Near Oman
Tankers carrying crude oil from the Persian Gulf now transit the Strait of Hormuz with disabled transponders and navigation lights before transferring cargo outside the strait, according to Bloomberg reporting. Roughly 150 ships have gathered off the coast of Oman, a sharp increase from about 40 vessels in January. State-backed operators like Saudi shipping company Bahri have deployed 16 Very Large Crude Carriers (VLCCs) near Oman, with additional vessels reportedly en route. This ship-to-ship transfer network formed in early May after the US military began monitoring transfers near Fujairah in the UAE and Sohar in Oman.
Saudi Arabian Bypass Routes and Red Sea Vulnerabilities
Saudi Arabia entered the regional conflict with operational advantages through its East-West pipeline, which possesses a capacity of 5 million barrels per day. According to Reuters, the pipeline transports crude from eastern fields across the kingdom to Yanbu, allowing Saudi Aramco to export from the Red Sea without using the Strait of Hormuz. However, Iranian mobilization of Houthi forces has turned the Red Sea and Bab el-Mandeb trade corridor into a high-risk secondary choke point. In response to Houthi attacks on tankers sailing from Yanbu, Aramco began offering Arab Medium and Arab Heavy crude to Asian refineries via ship-to-ship transfers off Fujairah, alongside Arab Light crude from Egypt’s Sidi Kerir terminal.
Did you know? Before the conflict escalation, nearly 20 million barrels of oil and refined products passed through the Strait of Hormuz daily, fueling analyst predictions of triple-digit crude prices if Iran enacted a full blockade. Instead, domestic pipelines, emergency reserves, and the expanding shadow fleet have sustained global supply levels.
Infrastructure Gaps and African Shipping Detours
While the UAE operates a dedicated 1,5 million-barrel-per-day pipeline from Abu Dhabi to Fujairah on the Gulf of Oman, Iraqi, Kuwaiti, and Qatari exports remain heavily dependent on the Strait of Hormuz. Constructing pipeline capacity sufficient to reroute 50 to 70 percent of current strait traffic requires extensive new infrastructure across multiple jurisdictions. Meanwhile, Reuters reported on August 12 that numerous VLCC tankers now avoid Bab el-Mandeb entirely, opting to move north through the Suez Canal or undertake significantly longer voyages around Africa’s Cape of Good Hope. This diversion increases transit distances by thousands of miles and exposes vessels to the growing risk of resurgent Somali piracy, particularly as US and allied naval forces previously stationed off East Africa have been redeployed to the Persian Gulf.
Frequently Asked Questions
Is the Strait of Hormuz currently closed?
No, the strait is not closed. A high-capacity shadow oil network continues to operate through the waterway, though many vessels now use disabled transponders and conduct ship-to-ship transfers outside the passage.
How are oil producers bypassing the strait?
Producers utilize existing pipelines like Saudi Arabia’s East-West pipeline to Yanbu and the UAE’s pipeline from Abu Dhabi to Fujairah in the Oman Gulf, alongside extensive ship-to-ship crude transfers near Oman and Fujairah.
What risks do alternative shipping routes face?
Alternative routes face severe disruptions, including Houthi attacks on tankers in the Red Sea and Bab el-Mandeb strait, as well as extended transit times and potential pirate threats along African detour routes.
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